Thames Water restructuring plan approved by High Court

Thames Water’s restructuring plans have been approved by the High Court, giving the beleagured utility a lifeline to avoid temporary nationalisation.

The UK’s biggest water supplier had been set to run out of money by 24 March without a £3bn loan from its creditors, amid debts of more than £19bn. Such an outcome would have almost certainly resulted in the company being placed in a special administrative regime (SAR)

“This is good news for our customers, puts our business on a firmer financial footing and enables us to continue to invest in our network and deliver critical infrastructure upgrades for our customers and the environment,” Chris Weston, Thames Water chief executive, told markets in a statement on Monday.

“Importantly, this decision will support the delivery of our turnaround which is underway.”

The High Court decision means Thames will receive up to £3bn in “super senior” funding, including an initial tranche of £1.5bn to extend liquidity until September 2025.

It will then receive a further £1.5bn across two tranches of £750m to keep it going until May 2026.

Critics argue Thames Water’s nationalisation would have enabled its unsustainable finances to be restructured in the public interest. The company serves some 16m customers and 8,000 employees across the UK.

It has sought significant bill hikes in recent months, even appealing to the Competition and Markets Authority (CMA) last year to re-asses Ofwat’s price determination.

The financing from its top-tier bondholders comes at a steep 9.75 per cent annual interest.

Thames Water’s senior lenders, also known as its Class A creditors, include Abrdn, Apollo Global Management, Elliott Investment Management and Invesco.

A smaller group of secondary creditors had proposed an alternative arrangement known as the “B plan.”

In a judgement on Tuesday, Mr Justice Leech said the “relevant alternative” to Thames’ plan being approved was a special administration.

“After taking into account the public interest in ensuring the uninterrupted provision of vital public services, I nevertheless exercise my discretion to sanction the plan.”

A spokesman for the Class A creditors group said: “We welcome the news that Justice Leech has sanctioned the Company’s Plan and recognises that there “a public policy in favour of rescuing the Thames Water Group and giving the market a chance to agree a permanent restructuring plan”.

“The judgment is a positive step towards efforts to deliver a highly complex operational turnaround and restructuring which will see Thames Water’s debt significantly reduced, billions in new equity for infrastructure investment provided, governance strengthened and vastly improved outcomes for customers and the environment delivered as soon as possible.

“A Thames Water SAR would signal regulatory failure and impose billions in additional costs on UK taxpayers, diverting money away from pressing public service priorities.”

However Matthew Topham, lead campaigner at campaign group We Own It, said: “This judgment is nothing but a stay of execution for Thames Water. The privatised company will limp on for a few more months like a profit-thirsty zombie.

“This crisis loan will keep Thames afloat in the short-term, but their underlying business model is rotten and should be condemned.

“It relies on piling up debt and raising customer bills so they can pay huge bonuses and dividends – all whilst pumping raw sewage into our waterways.

He added: “The reason they’re getting bailed out is because they ran out of other people’s money to line their pockets with. It’s only a matter of time before they end up on the edge of bankruptcy again.”